Best Buy Continues To Diversify By Selling Geek Squad Services

Best Buy, in a bid to open a new stream of revenues, has tied up with eBay and Target to offer their customers the services of its well-known Geek Squad personnel. eBay has added
service plans on its website for customers wishing to take advantage of the Geek Squad’s services while trials are also being conducted at some Target stores in Denver and Minneapolis.

This move is likely to make the Geek Squad a stand-alone brand in itself, and open up a new stream of revenues for Best Buy. The consumer electronics retailer has been struggling to compete with competitors following new-age business models. It is trying to develop technological capabilities and diversify beyond its legacy brick-and-mortar business model. If it plans to survive, it needs to differentiate itself from the competition and leverage its strengths. This move seems to be a step in that direction.

Geek Squad was founded 18 years ago by Robert Stephens, who rode around Minneapolis on his bicycle, helping people with technology problems. He sold the company to Best Buy in 2002, when he had 65 agents.

The Geek Squad, with its roughly 20,000 black-tied and white-shirted tech experts, is perhaps Best Buy’s most well-known and instantly recognizable brands. It has built a great reputation among customers over the years by providing honest and unbiased advice, sometimes to the extent of upsetting Best Buy’s executives. The latter group at times felt that the Geek Squad was not always promoting Best Buy’s business. However, according to Stephens, who still serves as a consultant to Best Buy, insisted that this would lead to erosion of trust among customers. It will be interesting to see how this plays out once they start working at Target stores and recommend customers to try Best Buy outlets.

How Will It Work?

eBay is offering customers around-the-clock Geek Squad support with service plans costing $29.99 for three months and $49.99 for six months. This service is available to everyone, regardless of whether they buy their electronic goods from eBay. Once they sign up, customers can get their Geek Squad help online, over the phone, and in Best Buy stores. Best Buy would surely welcome the additional traffic to its stores, which it would then use to drive additional sales. Best Buy and eBay haven’t disclosed how they will split the fee paid by customers.

Best Buy is also rolling out the Geek Squad service at 28 Target stores in Denver and one in Minneapolis. The Target deal offers Best Buy a way to reach more women. A majority of the discounter’s female customers don’t regularly visit Best Buy, according to George Sherman, senior vice president of Best Buy’s services business group.

How We See The Big Picture

Customers are still using physical stores to check out products and gain hands-on experience with gadgets. However, a large number of them then proceed to buy these from online stores like Amazon at cheaper prices. This phenomenon of show rooming has hit business hard for companies like Best Buy, and especially RadioShack.

To counter it, Best Buy is employing a mix of strategies.

It is trying hard to sell its products online and investing in building a strong internal IT team over the course of next 12 months. It plans to hire 200 professionals. Best Buy has also hired a new e-commerce chief, former Expedia Inc. President Scott Durchslag to lead this effort which shows its seriousness towards building capability in this space.

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